Do you remember Tucker: A Man and His Dream? If so, you will remember the story of a high-flying car designer and his failed dreams. Right now, the movie could be playing out in real life with Fisker (NYSE:FSR). Not sure how the 1988 film and the popular electric vehicle company go together? That means it is time to dive into Fisker stock.
The story here starts with a company called Fisker Automotive. It crashed and burned in 2013 after taking over $500 million in investment from the administration of President Barack Obama to build a hybrid called the Karma.
Amazingly, founder Henrik Fisker is back, this time with private backing, and 10 times more of it. Fisker went public Nov. 9 through a special purpose acquisition company (SPAC) called Spartan Energy.
The launch of Fisker stock raised $1 billion. As trade opened Nov. 30, the company had a market capitalization of $5.7 billion.
The Promise of Fisker Stock
Fisker’s new car is called the Ocean. It’s an SUV. It will be manufactured by Magna International (NYSE:MGA). Fisker says it’s designed to be leased, not sold.
The Karma was a hybrid, with both gasoline and electric power. The Ocean is an electric, due to launch in 2022. Like its predecessor, it has the environment at heart. This means the Ocean has solar panels on the roof and an interior made of recycled materials. However, all you can see for now is a prototype and a drawing.
Despite this, the stock is zooming. Fisker stock has doubled since its debut, making analyst Jeffrey Osborne of Cowen appear a prophet. Citicorp still has a buy rating on it with a $26 price target.
The Fisker story has a touch of Nio (NYSE:NIO) about it, and right now that’s a good thing. The company has an “experience center” by its headquarters, similar to Nio’s “Nio Houses.” Like Nio, which is having its cars made by JAC Motors in China, Fisker has contracted out its manufacturing.
Despite the promise of the leasing model, Fisker has already taken 9,000 deposits for new cars. The company will spend 2021 getting influencers and celebrities to build the brand.
The problem is that we’ve seen this movie before. It didn’t end well.
The first Fisker was early to the market, and government backed. The new Fisker may be late, and while shareholders are better owners than the government, enthusiasm alone won’t get the job done.
There are now more than 11 electric vehicle startups chasing the dream of being “the next Tesla.” In addition, there are the existing carmakers, companies like General Motors (NYSE:GM), Ford (NYSE:F) and Fiat Chrysler (NYSE:FCAU). There are the Germans like Volkswagen (OTCMKTS:VLKAY) and Chinese startups Li Motors (NASDAQ:LI) and Xpeng (NYSE:XPEV).
I called this a bubble last week. They can’t all be winners. Besides Tesla (NASDAQ:TSLA), we don’t know if any will be.
What electric vehicles have given investors so far is action, not profits. InvestorPlace contributor Larry Sullivan suggested letting the stock settle after its launch, but those who did so missed out on fat gains. Chris Tyler has also offered advice for traders, but I’m writing for investors.
The Bottom Line on Fisker Stock
The question investors should always ask is, will this company be worth more in five years than it is today? Will it be worth anything at all?
Fisker stock might be worth more if its ambitious plans play out. It could also be worthless. Given the track record of its founder, that’s more likely.
My problem with Fisker is that it’s too Tesla-like. It’s focused on driving as recreation, a combination of romance and style.
That’s not how the market will go. The open road isn’t where the big money is. I’ll pass on Fisker stock, and risk missing out.
On the date of publication, Dana Blankenhorn did not have (either directly or indirectly) any positions in any of the securities mentioned in this article.
Dana Blankenhorn has been a financial and technology journalist since 1978. He is the author of the environmental thriller Bridget O’Flynn and the Bear, available at the Amazon Kindle store. Follow him on Twitter at @danablankenhorn.